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Assuming there is not any communication between the both of sub-contractors. In fact, it is a non-cooperative game which both sub-contractor 1&2 do not know about each other’s strategy and each of them wants to get more profit with regard to his opponent’s strategy. In the above matrix, there are 4 situations. Now, we discuss each 4 situation for both sub-contractors.Situation 1: [sub-con1 (accepting), sub-con2 (accepting)]: The achieved benefits by this situation are (P1, P2) for subcontractor1&2 that P1= P2. In this strategy, benefits are divided between both sub-contractors and each of them makes profit from that.Situation 2: [sub-con1 (accepting), sub-con2 (denying)]: The benefit achieved in this situation is (P3, 0). In this strategy all of the benefit is achieved by sub-contractor1.Situation 3: [sub-con1 (denying), sub-con2 (accepting)]: The benefit achieved in this situation is (P3, 0). In this strategy all of the benefit is achieved by sub-contractor2.Situation 4: [sub-con1 (denying), sub-con2 (denying)]: In this situation both of the sub-contractors think that if they do not accept the main-contractor’s bid then the main-contractor has to increase the bid price. Then both sub-contractors can make more profit. In fact this strategy can be used when both sub-contractors to be aware of each other’s strategy. Then the benefit achieved by subcontractors is P4 that P4>P1&P2 and P3>P4. But in this situation, there would be no guarantee that any of the ones will not infract the agreement. As mentioned before, according to the prisoner’s Dilemma game there Pareto optimal points in this game which are (accepting, denying), (denying, accepting) and (denying, denying). But the Nash equilibrium point is (accepting, accepting) that is the best strategy which can be achieved the most profit for each of sub-contractors with considering their opponent’s strategy. So the ideal strategy according to the game theory is (accepting, accepting) .
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